Aviation Business News

T2RLEngage 2023: Covid legacy casts doubt on airlines’ ability to invest

The global airline industry remains 26% down on total Passengers Boarded (PB) following the Covid pandemic as it is facing the need to invest in modern retailing technologies.

This week’s T2RLEngage conference in London heard that the industry is at an “inflection point” where legacy IT systems are starting to be replaced by more modern technologies.

However, there are question marks about how airlines are going to find the money to invest in this new future as they continue to face the economic legacy of the pandemic.

T2RL uses PB metrics as a proxy for to assess the size of the market because it drives revenues and there is a direct correlation between bookings and what airlines are charging.

Bert Craven, deputy chief executive of T2RL, a specialist consultancy which works with airlines and IT vendors, said PBs are forecast to recover to within 5% of pre-Covid 2019 levels this year.

But he added: “Some regions have hit 2019 numbers and are well in to recovery…while others are still climbing out of the deficit caused by Covid.

“What we have to bear in mind is that we are now missing four years of growth at around 6% [per annum] so we are still in deficit by about 26% of passengers boarded.

“This is really important. It means there is some money missing, it means there is actually quite a lot of money missing from the industry.

“This is money that would have been planned in to the investment cycle some years ago and it is not now being materialised.

“And that comes at an inflection point where we are going to transform the industry, and we are short of money. Not just the airlines but the [IT] vendors.

“We need to think carefully about what this is going to mean because the investment needs to happen.”

Craven said the transformation away from old legacy PSS (Passenger Service System) platforms to new Order, Offer, Settle, Delivery (OOSD) IT infrastructure will be transformative.

“We think it’s going to change pricing, your costs and it may even change some of the business models we that we have become used to over many years.

“The question is what could these economic impacts be as a result of the deficit we are carrying?”

Craven said the market “continues obsess” about LCCs (Lowcost Carriers) because that is where it sees the potential for growth.

However, T2RL categories airlines based on the complexity of the carrier’s business model and estimates that true LCCs, like Ryanair, account for only 10% of the global sector.

Richard Clarke, chief executive and founder of T2RL, said: “We classify airlines on the complexity of their business model which is reflected in IT systems which is reflected in PB fees.”

Craven added: “There’s a big gap between competing at the lower fares end of the market and actually having lower costs. Complexity of the business model is the primary driver of costs.”

Clarke said: “As far as we are concerned the migration to OOSD pays for itself because it should be simpler and cheaper to deliver than it is today with all of the complexity we have.”

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